Innovation spending rises

28 October 2011

BRUSSELS: Most major brand owners increased their expenditure on innovation last year, with Roche, Microsoft and Toyota among the biggest spenders.

According to The European Commission, the regional governmental body, the 1,400 firms with the highest R&D investment levels worldwide boosted budgets by 4% to €456bn in 2010, after a 1.9% fall in 2009.

In all, 68 of the top 100 - which accounted for 58% of the overall total - increased their outlay, compared with just 46 during the previous 12 months.

The increased investment signals the importance to brand owners of innovation – the subject of Warc's new global prize – even in uncertain economic conditions.

Roche, the pharma group, led the charts on €7.2bn. This was equivalent to some 18.9% of overall sales, but was also a 4.5% decline year on year. Pfizer, from the same sector, was second on €7bn, a 21.4% improvement, and 13.9% of revenues.

Microsoft, the IT giant, claimed third having allocated €6.7bn to this discipline, up 3.8%, and 12.9% of its returns. Toyota, the carmaker, spent just over €6.6bn, a 19.8% drop and only 3.8% of sales.

Merck, another healthcare specialist, completed the top five on €6.4bn, a 47% jump year on year and 5.4% of revenues. Samsung, the electronics expert, was next on €6.2bn, a 24.9% lift, and 6.1% of sales.

Making up the top ten were Novatris, a further pharma firm, on €6bn, General Motors, the automaker, on €5.2bn, Johnson & Johnson, the healthcare group, on €5.1bn, and Intel, the semiconductor pioneer, on €4.9bn.

The 487 corporations analysed from the US committed €160bn to R&D in 2010, a 10% gain, with their 400 European peers logging €132bn, a 6.1% expansion. By contrast, the 267 Japanese enterprises tracked posted €99bn, down 9.7%.

Elsewhere, the 19 Chinese operators studied yielded a combined €7.6bn, a 29.5% leap. South Korea's 25 representatives in the list raised their outgoings by 20.5% to €13.5bn.

More specifically, US companies tended to focus on "high-intensity" R&D, like biotechnology and new IT software and services, taking 49% of worldwide spending in this area.

European organisation led when it came to "medium-level" innovations in areas like electronics, FMCG and media, delivering 35% of expenditure. The region's companies also took a 46% share of "low-level" R&D, covering fields such as utilities and construction.

"The upturn in R&D investment by EU companies is a positive signal," said Máire Geoghegan-Quinn, the commissioner for research, innovation and science, said. "However, the fact that we are still lagging behind some global competitors shows we have to improve conditions for business further."

Data sourced from European Commission; additional content by Warc staff